Bi-level programming DEA approach for efficiency evaluation: A case study of Indian electronics retail stores
DOI:
https://doi.org/10.2298/YJOR191124026PKeywords:
retail stores, electronics, Bi-level programming, data envelopment analysis, benchmarkingAbstract
Retail industry has witnessed enormous growth in the past decade in developing countries like India, China, and Brazil, owing to the upswing in globalization, growing trends in e-commerce, multi-format retailing, and increasing penetration of the internet. The growth of opportunities, on the other hand, have intensified the competition. It is important for retailers to gain a competitive edge in the market through innovative strategies and continuous improvement. Meticulous planning and efficiency in operations are the drivers for economic sustainability and profitability of the business. Important prerequisites to gain efficiency and planning for improvement is the evaluation of base level performance, defining benchmarks and evaluating effectiveness of the efforts taken in this direction. The studies in this domain existing in the literature have analysed efficiency of retail stores as a black box transforming input to outputs. This approach lacks transparency and overlooks the subprocesses, their characteristics and internal interaction and can be addressed considering the transformation process in a two stage system. Our study addresses the issue and proposes a Bi-level Programming DEA approach to evaluate the relative efficiency of multiple retail stores considering a network structure operating in a Stackelberg relation and defining benchmarks for inefficient stores. The approach enables computation of efficiency of each sub-stage as well as the overall efficiency of the stores. The proposed approach is validated through a case study of Indian electronic retail chain.References
Balios, D., Eriotis, N., Fragoudaki, A., Giokas, D., "Economic efficiency of Greek retail SMEs in a period of high fluctuations in economic activity: A DEA approach", Applied Economics, 47 (33) (2015) 3577-3593.
Bard, J.F., Moore, J.T., "A branch and bound algorithm for the bilevel programming problem", SIAM Journal on Scientific and Statistical Computing, 11 (2) (1990) 281-292.
Betancourt, R., Gautschi, D., "Demand complementarities, household production, and retail assortments", Marketing Science, 9 (2) (1990) 146-161.
Ben-Ayed, O., "Bi-level linear programming", Computers and Operations Research, 20 (5) (1993) 485-501.
Bazargan, M., Vasigh, B., "Size versus efficiency: a case study of US commercial airports", Journal of Air Transport Management, 9 (3) (2003) 187-193.
Chao, S.L., Yu, M.M., Hsieh, W.F., "Evaluating the efficiency of major container shipping companies: A framework of dynamic network DEA with shared inputs", Transportation Research Part A: Policy and Practice, 117 (2018) 44-57.
Charnes, A., Cooper, W.W., Rhodes, E., "Measuring the efficiency of decision making units", European Journal of Operational Research, 2 (6) (1978) 429-444.
Chen, Y., Zhu, J., Rhodes, E., "Measuring information technology's indirect impact on firm performance", Information Technology and Management, 5 (1-2) (2004) 9-22.
Chen, Y., Cook, W.D., Li, N., Zhu, J., Rhodes, E., "Additive efficiency decomposition in two-stage DEA", European Journal of Operational Research, 196 (3) (2009) 1170-1176.
Cooper, W.W., Seiford, L.M., Tone, K., "Data envelopment analysis", Handbook on Data Envelopment Analysis, 1st ed., eds: Cooper, William W., Seiford, Lawrence M., Zhu, Joe, (2004) 1-40.
Jorge de Moreno, J., "Productivity growth of European retailers: a benchmarking approach", Journal of Economic Studies, 37 (3) (2010) 288-313.
Donthu, N., Yoo, B., "Retail productivity assessment using data envelopment analysis", Journal of Retailing, 74 (1) (1998) 89-105.
Duman, G.M., Tozanli, O., Kongar, E., Gupta, S.M., "A holistic approach for performance evaluation using quantitative and qualitative data: a food industry case study", Expert Systems with Applications, 81 (2017) 410-422.
Esmaeili, M., Aryanezhad, M.B., Zeephongsekul, P., "A game theory approach in seller buyer supply chain", European Journal of Operational Research, 195 (2) (2009) 442-448.
Fisk, C.S., "Game theory and transportation systems modelling", Transportation Research Part B: Methodological, 18 (4-5) (1984) 301-313.
Fernie, J., Sparks, L., "Logistics and retail management: emerging issues and new challenges in the retail supply chain", Kogan Page Publishers, London, UK, 2018.
Gandhi, A., Shankar, R., "Efficiency measurement of Indian retailers using data envelopment analysis", International Journal of Retail and Distribution Management, 42 (6) (2014) 500-520.
Ganesan, S., George, M., Palmatier, R.W., Weitz, B., "Supply chain management and retailer performance: emerging trends, issues, and implications for research and practice", Journal of Retailing, 85 (1) (2009) 84-94.
Gupta, A., Mittal, S., "Measuring retail productivity of food and grocery retail outlets using the DEA technique", Journal of Strategic Marketing, 18 (4) (2010) 277-289.
Gupta, A., Pachar, N., Darbari, J.D., Jha, P.C., "Efficiency Assessment of Indian Electronics Retail stores using DEA", International Journal of Business Performance and Supply Chain Modelling, 10 (4) (2019) 386-414.
Hilmola, O.P., "Analysing global railway passenger transport through two-staged efficiency model", International Journal of Information and Decision Sciences, 2 (3) (2010) 273-284.
Hjaila, K., Puigjaner, L., Lainez, J.M., Espuna, A., "Integrated game-theory modelling for multi enterprise-wide coordination and collaboration under uncertain competitive environment", Computers and Chemical Engineering, 2 (3) (2017) 209-235.
Huang, C.W., Ho, F.N., Chiu, Y.H., "Measurement of tourist hotels productive efficiency, occupancy, and catering service effectiveness using a modified two-stage DEA model in Taiwan", Omega, 48 (2014) 49-59.
IBEF Indian Brand Equity Foundation "Indian Consumer Durables Industry Analysis", available at: https://www.ibef.org/industry/consumer-durables-presentation (accessed May, 2019).
IBEF Indian Brand Equity Foundation "Indian Retail Industry", https://www.ibef.org/industry/retail-india.aspx (accessed March, 2019).
Izadikhah, M., Tavana, M., Di Caprio, D., Santos-Arteaga, F.J., "A novel two-stage DEA production model with freely distributed initial inputs and shared intermediate outputs", Expert Systems with Applications, 99 (2018) 213-230.
Kao, C., Hwang, S.N., "Efficiency decomposition in two-stage data envelopment analysis: An application to non-life insurance companies in Taiwan", European Journal of Operational Research, 185 (1) (2008) 418-429.
Kao, C., "Efficiency decomposition in network data envelopment analysis: A relational model", European Journal of Operational Research, 192 (3) (2009) 949-962.
Keh, H.T., Chu, S., "Retail productivity and scale economies at the firm level: a DEA approach", Omega, 31 (2) (2003) 75-82.
Khodakarami, M., Shabani, A., Saen, R.F., Azadi, M., "Developing distinctive two-stage data envelopment analysis models: An application in evaluating the sustainability of supply chain management", Measurement, 70 (2015) 62-74.
Ko, K., Chang, M., Bae, E.S., Kim, D., "Efficiency analysis of retail chain stores in Korea", Sustainability, 9 (9) (2017) 1629.
Lau, K.H., "Measuring distribution efficiency of a retail network through data envelopment analyses", International Journal of Production Economics, 146 (2) (2013) 598-611.
Li, F., Zhu, Q., Zhuang, J., "Analysis of fire protection efficiency in the United States: a two-stage DEA-based approach", OR Spectrum, 40 (1) (2018) 23-68.
Liang, L., Yang, F., Cook, W.D., Zhu, J., "DEA models for supply chain efficiency evaluation", Annals of Operations Research, 145 (1) (2006) 35-49.
Omrani, P.Y., Keshavarz, M., "A performance evaluation model for supply chain of shipping company in Iran: an application of the relational network DEA", Maritime Policy and Management, 43 (1) (2016) 121-135.
Osborne, M.J., Rubinstein, A., "A course in game theory", Massachusetts Institute of Technology, The MIT Press, 1994.
Pestana Barros, C., Alves, C.A., "Hypermarket retail store efficiency in Portugal", International Journal of Retail and Distribution Management, 31 (11) (2003) 549-560.
Pande, S., Patel, G.N., "Assessing cost efficiency of pharmacy retail stores and identification of efficiency drivers", International Journal of Business Performance Management, 14 (4) (2013) 368-385.
PWC PricewaterhouseCoopers Private Limited, "Future of consumer durables and electronics in India", accessed at: https://www.pwc.in/assets/pdfs/publications/2018/future-of-consumer-durables-and-electronics-in-india.pdf (accessed November, 2018).
Rahmati, A., Hosseinalipour, S., Dai, H., "Optimal Time Allocation in VANETs Advertising: A Price-Based Approach using Stackelberg Game", ICC 2019-2019 IEEE International Conference on Communications (ICC), Shanghai, China, 2019, 1-16.
Renner, A., Kirigia, J.M., Zere, E.A., Barry, S.P., Kirigia, D.G., Kamara, C., Muthuri, L.H., "Technical efficiency of peripheral health units in Pujehun district of Sierra Leone: a DEA application", BMC Health Services Research, 5 (1) (2005) 77.
Saaty, T.L., "The Analytic Hierarchy Process", McGraw-Hill, New York, 1980.
Sahin, F., Robinson, E.P., "Flow coordination and information sharing in supply chains: review, implications, and directions for future research", Decision Sciences, 33 (4) (2002) 505-536.
Seiford, L.M., Zhu, J., "Profitability and marketability of the top 55 US commercial banks", Management Science, 45 (9) (1999) 1270-1288.
Sexton, T.R., Lewis, H.F., "Two-stage DEA: An application to major league baseball", Journal of Productivity Analysis, 19 (2-3) (2003) 227-249.
Shaffee, M., Lotfi, F.H., Saleh, H., Ghaderi, M., "A mixed integer bi-level DEA model for bank branch performance evaluation by Stackelberg approach", Journal of Industrial Engineering International, 12 (1) (2016) 81-91.
Shahroudi, K., Taleghani, M., Mohammadi, G., "Application of two-stage DEA technique for efficiencies measuring of private insurance companies in Iran", International Journal of Applied Operational Research, 1 (3) (2012) 91-104.
Sharma, V., Choudhary, H., "Measuring operational efficiency of retail stores in Chandigarh Tri-city using DEA", Journal of Services Research, 10 (2) (2010) 99.
Shi, C., Lu, J., Zhang, G., "An extended Kuhn-Tucker approach for linear bilevel programming", Applied Mathematics and Computation, 162 (1) (2005) 51-63.
Shi, C., Lu, J., Zhang, G., Zhou, H., "An extended branch and bound algorithm for linear bilevel programming", Applied Mathematics and Computation, 180 (2) (2006) 529-537.
Sinha, A., Malo, P., Frantsev, A., Deb, K., "Finding optimal strategies in a multi-period multi-leader follower Stackelberg game using an evolutionary algorithm", Computers and Operations Research, 41 (2014) 374-385.
Soheilirad, S., Govindan, K., Mardani, A., Zavadskas, E.K., Nilashi, M., Zakuan, N., "Application of data envelopment analysis models in supply chain management: a systematic review and meta-analysis", Annals of Operations Research, 271 (2) (2018) 915-969.
Stackelberg, H.V., "Theory of the market economy", Oxford University Press, Oxford, 1952.
Toloo, M., Emrouznejad, A., Moreno, P., "A linear relational DEA model to evaluate two-stage processes with shared inputs", Computational and Applied Mathematics, 36 (1) (2017) 45-61.
Takouda, P.M., Dia, M., "Relative efficiency of hardware retail stores chains in Canada", International Journal of Operational Research, 27 (1-2) (2016) 275-290.
Vaz, C.B., Camanho, A.S., Guimaraes, R.C., "The assessment of retailing efficiency using network data envelopment analysis", Annals of Operations Research, 173 (1) (2010) 5-24.
Von Neumann, J., "On the theory of parlor games", Mathematische Annalen, 100 (1928) 295-320.
Wakchaure, S.S., Jha, K.N., "Determination of bridge health index using analytical hierarchy process", Construction Management and Economics, 30 (2) (2012) 133-149.
Wanke, P.F., "Physical infrastructure and shipment consolidation efficiency drivers in Brazilian ports: A two-stage network-DEA approach", Transport Policy, 29 (2013) 145-153.
Wanke, P., Blackburn, V., Barros, C.P., "Cost and learning efficiency drivers in Australian schools: a two-stage network DEA approach", Applied Economics, 48 (38) (2016) 3577-3604.
Wu, D.D., "Bilevel programming data envelopment analysis with constrained resource", European Journal of Operational Research, 207 (2) (2010) 856-864.
Wanke, P., Azad, M.A.K., Emrouznejad, A., Antunes, J., "A dynamic network DEA model for accounting and financial indicators: A case of efficiency in MENA banking", International Review of Economics and Finance, 61 (2019) 52-68.
Xavier, J.M., Moutinho, V.F., Moreira, A.C., "An empirical examination of performance in the clothing retailing industry: A case study", Journal of Retailing and Consumer Services, 25 (2015) 96-105.
Yu, M.M., Chen, L.H., Hsiao, B., "A fixed cost allocation based on the two-stage network data envelopment approach", Journal of Business Research, 69 (5) (2016) 1817-1822.
Yu, W., Ramanathan, R., "An assessment of operational efficiencies in the UK retail sector", International Journal of Retail and Distribution Management, 36 (11) (2008) 861-882.
Yu, W., Ramanathan, R., "An assessment of operational efficiency of retail firms in China", Journal of Retailing and Consumer Services, 16 (2) (2009) 109-122.
Yu, Y., Shi, Q., "Two-stage DEA model with additional input in the second stage and part of intermediate products as final output", Expert Systems with Applications, 41 (15) (2014) 6570-6574.
Zhou, X., Luo, R., Tu, Y., Lev, B., Pedrycz, W., "Data envelopment analysis for bi-level systems with multiple followers", Omega, 77 (2018) 180-188.
Zhu, J., "Multi-factor performance measure model with an application to Fortune 500 companies", European Journal of Operational Research, 123 (1) (2000) 105-124.
Zugno, M., Morales, J.M., Pinson, P., Madsen, H., "Bilevel model for electricity retailers participation in a demand response market environment", Energy Economics, 36 (2013) 182-197.
Downloads
Published
Issue
Section
License
Copyright (c) 2020 YUJOR
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
